Susquehanna: Monsanto Investors More Focused On Syngenta Than Underlying Business

In a report published Tuesday, Susquehanna analyst Don Carson maintained a Positive rating and $140 price target on Monsanto Company (NYSE: MON), while lowering the estimates for the company to reflect higher price, volume and FX headwinds.

"Underlying earnings are down by more than our estimate cut as the gross profit contribution from the expanded Scott's Roundup license offsets much of the increased headwinds in the base business in addition to offsetting a now delayed additional licensing income potential in Seeds," Carson explained.

Although the company is expected to lower its F2015 EPS guidance due to ag headwinds, the analyst expects investors to be more focused on the acquisition bid from Syngenta AG (ADR) (NYSE: SYT), although Monsanto has rejected the bid as inadequate.

Monsanto has revised its F2015 EPS guidance to the low end of its previous guidance, to reflect FX headwinds from a strong U.S. dollar, along with lower global corn acreage and lower than anticipated corn seed pricing. The company also indicated that it intended to offset of these factors with a planned reduction in its base operational expenses for F2015, while continuing to spend on growth platforms.

According to the Susquehanna report, "In late May MON indicated that it was seeing additional headwinds in the form of a faster than expected decline in Roundup pricing, lower than expected US soybean acreage, and further deterioration in international corn seed demand. Since then wet weather has further reduced the likely US soybean planted acreage outlook and the $ has strengthened further."

The FY15 EPS estimate has been lowered by $0.10 to $5.75.